The European Union (EU) is not a state and is not a traditional International Organization. It is common to characterize it as a hybrid system with a federal component. Since nothing comparable to this exists at this point, understanding the internal system of the EU is crucial. In addition to outlining the internal policy-making of the EU, it is also important to understand the internal system of the Mercosur, particularly given that the Mercosur has tried to replicate the institutional design of the EU.
Since its creation in 1957 with the Treaty of Rome, the EU has changed dramatically in a variety of ways in a short period of time. The discussion will examine these changes in relation to the period between 1985 and 2007. In addition to analysing the changes in policy-making over this period of the time it is also important to note that the number of EU member states has quadruplicated since it was created in 1957. It could be argued that this has resulted in a decline in the amount of power held by each individual member state. In 1986 Spain and, to a lesser extent, Portugal brought a Mediterranean influence into EU politics. This was later balanced out by further enlargement in 1995 which saw Austria, Finland and Sweden joining the EU. However, the single largest enlargement in the history of the EU took place in 2004 when 10 Central and Eastern Europe countries became EU members. Prior to 2004, this issue was the main focus of the EU external relations since 1989 until it came into effect in 2004. The end of the Cold War and the breakup of the Soviet Union into several independent republics absorbed EU external relations to the point that it had an effect on other external relations, including external relations with Latin America. The enlargement of the EU in 2007 is not discussed in any detail here because it did not have an impact on the EU policy towards Mercosur.